International Trade Based on the Ability to Adjust

Peter A. Petri
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Peter A. Petri: Brandeis University

Chapter 3 in Structural Adjustment in Developed Open Economies, 1985, pp 62-87 from Palgrave Macmillan

Abstract: Abstract The recent volatility of international trade and mounting pressures for protection have stimulated new interest in the role of adjustment in trade theory. An excellent cross-section of current research is provided by an NBER volume on import competition and adjustment (Bhagwati, 1982). These essays show that adjustment may be, or may appear to be, costly for several reasons. First, real resources may be required to switch factors of production from one activity to another, as in retraining or retooling.1 Second, adjustment may induce unemployment because of imperfections in factor markets.2 Third, adjustment may be made costly by policy; for example, subsidies to declining industries may raise costs above competitive levels for expanding industries.3

Keywords: Adjustment Cost; Price Function; Trade Pattern; World Market Price; Import Competition (search for similar items in EconPapers)
Date: 1985
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Persistent link: https://EconPapers.repec.org/RePEc:pal:intecp:978-1-349-17919-0_3

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DOI: 10.1007/978-1-349-17919-0_3

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